Can I lose my boat after the seller declared bankruptcy? 16 Answers as of August 01, 2011

I purchased a boat in good faith. I paid cash. I did wait a few months before registering the boat and getting the title in my name. I found out that the seller declared bankruptcy. The bankruptcy attorney is writing and telling me that I have to give back the boat. I have the title in my name. 1. Can they really take the boat? 2. If so, what kind of legal action do they have to take to get it back. 3. Is there any way I can fight this?

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When someone files bankruptcy, the court appoints a trustee who looks to see if there are any assets that can be recovered for the bankruptcy estate. Trustees can rescind transfers of property within the last two years (four in Colorado) if the transfer was not made for fair market value. This means that if the seller sold you a $5,000 boat for only $5, then the Trustee can sue you and recover the boat. However, if you negotiated the price with the seller and the value is close to fair market value, then the Trustee will not do anything.

Given that it’s the seller’s attorney advising you to return the boat, I would not comply with his/her request. Instead, wait until you are contacted by a court-appointed trustee. And yes, you d o have legal rights such as due process, which means you have a right to a hearing and it will be the trustee’s burden to prove that the boat sale was not for fair market value. Basically, it will take a judge’s order to force you to return the boat.

There are not enough facts here to answer this question fully. It sounds like the trustee is trying to get it back on the theory you did not pay fair market value for it. You need to see a lawyer ASAP.

Do not return the boat to the attorney. Wait for the trustee to get in contact with you. Explain to the trustee what happened. If the trustee still requires you to return the boat then obtain legal representation.

If you paid a reasonable price for the boat, then you don't have to give the boat back, however if they sold you the boat for much less than the reasonable value you might have to give it back or pay what the amount should have reasonably be.

It is unclear from the facts you describe exactly what is going on. Generally speaking though, the bankruptcy trustee has the right to undo or rescind transfers that occurred before the bankruptcy. This usually only happens when it looks like the debtor was trying to manipulate the system by questionably transferring assets prior to filing bankruptcy (typically when the sale/transfer occurs within 6-months prior to filing). The trustee will look to see if the price you paid was reasonable or not, and if they believe there is enough value in the boat to benefit the bankruptcy estate. However, as long as there was no fraud involved, and the transfer is cancelled then you would receive the purchase money from the bankruptcy estate.

If you purchase property such as a boat from someone who then files bankruptcy the transaction is subject to being set aside as a voidable preference unless it was an arms length fair market value sale.

In general, if a Debtor transfers, or sells any property within 2 years of filing bankruptcy, the Trustee can file an action against the buyer of such property to reclaim the property. The Trustee's job is to administer the estate of the Debtor, and to protect the rights of the creditors. The rationale is that the Debtor could have paid his creditors by selling "the property," and turning those funds over to his creditors. In your scenario, the Trustee can "avoid the transfer" and "take" the boat. Rather than "turn over" the boat to the Trustee, the "buyer" can negotiate with the Trustee to retain the property, and pay back the equity to the Trustee. The Trustee will then disburse those funds pro rata to the creditors that filed claims in the Debtor's case. If the "seller" does not respond to the Trustee's demands, the seller may be sued by the Trustee. Sellers who are caught in this dilemma will often hire a creditor's attorney who can negotiate with the Trustee, and protect the rights of the "unaware" buyer.

You should talk with a bankruptcy lawyer to see if your transaction is considered a preferential payment. If you are not related generally this is limited to 90 days prior to the filing of the bankruptcy.

If you did not record the title transfer in accordance with state law, the seller owned the boat until you did. So the title transfer, if it happened within 90 days of the filing, means your ownership can be undone. And you do not get any money back. YOU NEED A LAWYER-NOW

I really don't understand. If you bought it in a standard commercial transaction, there should be no problem. I'd tell the lawyer I want to hear that demand from the trustee, along with an explanation.

It sounds as though you are involved in a possible fraudulent conveyance. This occurs when an item of personal or real property is sold for less than fair market value. If this has occurred, the transaction may be unwound and you may have to return the boat, but would receive your money or consideration back. There are not enough details here to give an adequate response, but this is a start. If you think you got a deal that is too good to be true, it just might be. Thanks for tuning in!

If you paid cash on a valid contract and have title, as long as not a fraudulent transfer, you should be able to argue that its legally yours without consequence. Unless boat was asset in debtor's BK case that court wants to pay creditors.

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